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The Optimistic Science

Economics beat extreme poverty in Victorian England as Sylvia Nasar demonstrates in her new book, 'Grand Pursuit,' but a wider world awaits that same salvation. By Michael Maiello.

It’s almost odd that just as Sylvia Nasar’s Grand Pursuit: The Story of Economic Genius arrives in bookstores that its American audience was greeted with the news, by way of the latest Census, that 46 million fellow citizens live below the poverty line. The poverty rate has not been this high since 1993. Where is this genius of economics while so many are suffering?

Indeed, one of the reasons that Nasar, whose previous bestseller, A Beautiful Mind, brought game theorist John Forbes Nash Jr. to mainstream attention, devoted 10 years to bringing cohesion to the story of modern economics is that she believes that economic troubles can inspire people to make stupid decisions that give rise to further misery and even fascism. In this, Nasar is akin to Paul A. Samuelson, the first American to win the Nobel Prize in economics, who believed that the goal of economics is to foster full employment and prosperity, while avoiding depressions. “It is not too much to say that the widespread creation of dictatorship and the resulting WWII stemmed in no small measure from the world’s failure to meet this basic economic problem adequately,” he wrote, in a passage quoted by Nasar.

Nasar places Victorian England as the birthplace of modern economic thought. Prior to that, she says, economics was dominated largely by moral and political philosophers who accepted without much question that the vast majority of people on Earth would always live and work in dire poverty. Grand Pursuit is driven at each point by the characters who have dominated economics since, but it’s really the story of the development and acceptance of a few ideas, chief among them that living standards will always be tied to private-sector productivity gains and any policy that gets in the way of that is bad economic policy.

She begins with the truly poor, and with the work of Charles Dickens, who was as much a reporter of economy and society as he was a storyteller. “Every Victorian intellectual fancied himself an economic thinker,” says Nasar, by way of explaining this choice. In his talks and writing, Dickens urged economic thinkers to consider poverty alleviation as the moral underpinning of the science.

At the time, most people were illiterate. Most would never leave their hometowns and didn’t have the educations they’d need to survive if they did. Starvation and diseases arising from malnutrition were daily worries. In most tellings of history, a writer would claim that industrial advancement and new medical technologies came around to change all of that. But Nasar believes she’s gone a level deeper by identifying changes in economic thought that helped people direct these technological advances to better results than had been seen at any point in prior history.

“People did not suddenly become more clever,” Nasar says. “People have been inventive throughout the history of the species. In Ancient Greece or in Imperial China. Something else was at work.”

London’s 1866 financial panic was a key moment. Bread prices skyrocketed, a wave of bankruptcies put productive young men out of work and a cholera epidemic broke out. Karl Marx, living in London, saw the upending of the capitalist system at hand and his patron Friedrich Engels (who came from a deeply religious background) set his charge off to write the Book of Revelations for the whole capitalist enterprise.

But the system righted itself. British mathematician Alfred Marshall, a man who wanted to find ideas that would “put mankind in the saddle,” was the first to tie private productivity with the potential for rising living standards. This was a big step forward for a science that had previously accepted mass poverty as something akin to frequent sunrises. Here, economists started to believe that capitalism could be organized in such a way that it would create broadly distributed public good.

The next step was minimum standards and the creation of a welfare state, which was, surprisingly, the idea of a staunch British libertarian named Beatrice Potter who, after a self-imposed stint working as a seamstress in a sweatshop, became an anti-poverty crusader. She convinced Winston Churchill that there should be some minimal standard for wages and some assistance to prevent levels of poverty that society ought not to tolerate.

Nasar sees the rise of India and China, as well as the Arab Spring, as opportunities for sound economics to perform still other miracles.

A surprising lesson of Nasar’s book is that countries have a lot of choices when it comes to managing their economies well. Sweden and the U.S. maintain high standards of living for their people despite wildly divergent appetites for social programs and government mandates.

Which brings us back to today’s poverty in the Western world. It is nothing so severe as the wretched circumstances that begin Nasar’s tale. There is also a sense, through discussions of Samuelson (and John Maynard Keynes) that while the economy can be manipulated and guided, that it cannot be controlled. Joseph Schumpeter’s insistence on the primacy of entrepreneurial energy (and even Keynes’ “animal spirits”) can only function if we accept a certain degree of creative destruction that will harm some even as the lot of humanity improves generally.

Western poverty aside, the Victorian extremes (and worse) still exist for too many people around the world. Nasar sees the rise of India and China, as well as the Arab Spring, as opportunities for sound economics to perform still other miracles. Perhaps extreme poverty can one day be eliminated, leaving us only to contend with lesser problems of want that are endemic to the system. Or maybe that’s just pre-Victorian thinking again.